Oscar-winning producer Graham King is in the throes of redefining his business model and raising movie funds after the recent departure of his longtime financial backer Tim Headington.
The official split between King and Headington, who was co-owner of GK Films since they formed the company in 2007, came after the billionaire Texas oilman incurred tens of millions of dollars in losses, including $80 million alone on Martin Scorsese’s 2011 3D family adventure-drama “Hugo.”
King, 52, who counts among his screen credits the Oscar-winning pictures “The Departed” and “Argo” (the latter of which he executive produced), is one of several high-profile Hollywood figures, including former Warner Bros. film chief Jeff Robinov and Walt Disney Studios ex-chairman Dick Cook, who are pounding the pavement in search of potential investors. All three declined to comment for this story.
King, for one, is not seeking another financial partner to replace Headington, but rather is approaching independent investors and studios both here and abroad about financing his current and future pictures, according to people with knowledge of the producer’s current strategy. These sources also note that King is now personally bankrolling overhead at his slimmed-down production company in Santa Monica. Its staff of 15 was once at twice that number, and King has not ruled out capital-raising schemes such as a slate financing deal if he can land one.
“The odds on a single film investment turning a profit are worse than the odds at the roulette wheel without any safety net,” says John Heyman, the 80-year-old founder and chairman of World Film Group, who has raised $3.8 billion in film financing over the past four decades. “A slate deal has a better chance of showing a return, and there is always the unwritten assumption that no studio dare let a slate investor lose his entire shirt.”
Robinov and King have no plans to team up in a joint production company, sources close to both men confirmed, though they didn’t rule out the possibility the two could partner on individual movies in the future.
King is close to finalizing a financing deal with Sony for “Mercury,” a Freddie Mercury biopic with Ben Whishaw starring and Dexter Fletcher directing that is expected to begin production in late spring. He is also a producer on the $55 million movie “Jersey Boys,” a Clint Eastwood-directed adaptation of the Broadway musical, which is in post-production at Warner Bros. and due out in June.
While King, Robinov and Cook each have different ambitions and business models, their common goal of seeking independent financing outside the studio system is emblematic of today’s increasingly strained movie economics. Production and marketing costs continue to soar, with theater attendance challenged by competing entertainment choices for consumers, and the fallout from collapsing DVD sales having reduced once-reliable revenue streams to a trickle.
Consequently, studios like Paramount, Universal and, most recently, Sony Pictures have been reducing the number of films they self-fund each year, increasingly relying on producers such as David Ellison (at Paramount) and Thomas Tull (at Universal), who come with co-financing resources to help mitigate risk on higher-cost movies.
Robinov, a seasoned studio executive who left Warner Bros. last year after losing a power struggle for the CEO job, is looking to raise at least $200 million-$300 million in equity, with a matching contribution in bank debt, say sources close to the former executive. The deal would also include a distribution agreement as well as an expected investment of $50 million in Robinov’s new production company from a studio — most likely Sony Pictures or 20th Century Fox.
Although both studios have been aggressively pursuing an accord with Robinov, many industry insiders are betting on the former to seal the deal. Fox already has two co-financing partners in Dune Entertainment and Arnon Milchan’s New Regency. Meanwhile, Sony’s recently announced financing deal with Blue Anchor Entertainment, which aims to raise $350 million-$400 million in equity and another $300 million in bank debt, has yet to be funded. That leaves Sony without a co-financing partner — and potentially more motivated to go after Robinov, who oversaw such blockbusters as “The Dark Knight” and its sequel; “The Hangover”; and “Inception” during his 16-year tenure at Warner Bros.
Robinov, who is said to have some serious interest from investors both domestic and international, is evaluating a variety of opportunities and weighing different business structures, according to sources.
In addition to the production expertise Robinov, King and Cook bring to potential investors are their strong ties to top stars and filmmakers from Leonardo DiCaprio and Johnny Depp to Ben Affleck, Martin Scorsese and Christopher Nolan.
Still, money is not easy to come by, even for Hollywood vets with vast experience and a strong track record.
Just ask Cook, who was fired from Disney in 2009 after nearly 40 years, and for the past four years has been struggling to raise $1 billion to create his own family-friendly film studio, complete with development, production, distribution, marketing and advertising divisions. While at Disney, Cook oversaw the hugely successful “Pirates of the Caribbean” and “National Treasure” franchises, as well as “The Incredibles” and “Finding Nemo,” to name a few.
When Cook was greenlighting those hits, the biz was comparatively awash in financing.
“Those days ended in the mid-2000s, where hedge funds and institutional money invested in the movie business to go to cool parties,” says David Bank, a global media analyst at RBC Capital Markets. “It’s much harder than it used to be. It takes a specialized investor, a high net worth financier — and I can’t name that many guys doing it.”
As interest rates rise, the prospective returns on slate deals will cost more and yield less, adds Heyman, noting: “Investors in studio deals have to have reasons beyond a pure financial return, and too many have already been burned.”
Peter Bart contributed to this report.